Fuel Laundering

Robert Jenrick Excerpts

Tuesday 22nd May 2018 Commons Chamber

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

I thank my hon. Friend the Member for North Antrim (Ian Paisley) for raising an important issue, which I know that he, his constituents, and the effective quartet of Members from Northern Ireland who are here this evening—[Interruption.] Quintet, I do apologise. Who could forget? I know that this is an issue that many people feel strongly about. I know that the Chancellor of the Exchequer will be delighted to hear that the Democratic Unionist party now wants to be cost neutral, and I will make sure that that is taken into consideration in future conversations.

Fuel duty makes an important contribution to the public finances. In 2016-17, it generated £28 billion, or nearly 5% of total tax revenue. It is the fifth largest source of tax revenue to the Exchequer, behind only income tax, national insurance contributions, VAT and corporation tax, so, as my hon. Friend rightly suggested, this matters. Fuel fraud is not a victimless crime. It deprives the Exchequer of funds that pay for public services, and fuel laundering—the removal of chemical dyes and covert markers from rebated fuel to give the appearance of legitimate road fuel—poses a range of further risks to the public. Criminals experimenting with the process to defeat the new marker can create, as we have seen, a high risk of explosion, fire and potential risk to life. Laundering plants also produce toxic waste, which causes environmental damage. Finally, as we have also seen, illicit fuel is often transported in vehicles that are unfit for purpose and unsafe. As with any form of fraud, fuel fraud is a serious concern, and we recognise that it can be linked to organised crime, serious organised crime and, as my hon. Friend argued, the financing of paramilitary activity. That is a concern across the United Kingdom and, quite obviously, a particular concern in Northern Ireland.

For all those reasons and those set out by my hon. Friend, the Government are and must be committed to tackling the issue and to giving it the due consideration that it deserves. HMRC’s strategy to tackle fuel duty fraud has seen the UK’s tax gap for fuels in general fall from £1.5 billion in 2002 to less than £100 million in 2015-16, but £100 million remains a significant sum of money, as we have heard. In Northern Ireland, where the issue is a particular problem, the illicit market share has, according to HMRC, fallen from 26% to 8% over the same period. None the less, there is no room for complacency. Indeed, there has been a modest increase in laundering plant detections over the past year, which should give us all cause for concern. The new fuel marker that was brought in together with the Republic of Ireland in April 2015 to tackle the problem of fuel laundering is part of the significant investment made by HMRC to ensure that all businesses and individuals contribute to the tax revenues that are required to fund our public services. I appreciate that my hon. Friend has in the past raised objections to Accutrace, but I will return to those shortly.

As outlined in HMRC’s evaluation of Accutrace, the new marker has led to a reduction in the number and size of fuel laundering plans discovered by HMRC, although there has been a modest uptick over the past year. That apparent success reflects our commitment to tackle fuel fraud, as evidenced by the reinvestment of over £1 billion in HMRC’s fight against evasion and fraud over the spending review period. To continue that work, the Government announced the expansion of road fuel testing unit capacity in Northern Ireland in particular, but also in mainland Great Britain, in addition to the extra resource for fuel fraud work within HMRC’s criminal investigation directorate that was announced in the autumn statement 2013. That should complement HMRC’s fleet of road fuel testing vehicles, all of which are equipped with gas analysers that all officers have been fully trained to use. In 2016-17 alone, HMRC took 45,000 samples in the UK, so the problem is being addressed seriously at quite a scale across the UK.

Multi-agency, cross-border co-operation is clearly essential, and HMRC chairs a quarterly multi-agency cross-border fuel fraud group to share intelligence and information on operational activity, as well as co-ordinating joint operations. I have reiterated the importance of that with the Minister of State for Security and Economic Crime in advance of this debate. HMRC’s testing capability can now identify markers down to parts per million, including the new Accutrace marker that has been introduced on both sides of the border. HMRC investigates all attempts to remove Accutrace. To date, HMRC advises that there is nothing to suggest that rebated fuel can successfully be laundered to remove the marker in a way that is not detectable to HMRC. Although all markers have theoretical vulnerabilities and there is no perfect marker on the market, this new marker cannot be removed profitably at any scale. It remains HMRC’s view that the marker has been, and continues to be, effective in driving down fuel fraud. Clearly, I am interested in hearing further evidence from my hon. Friend if he wishes to engage with this. Where HMRC has detected laundering plants, these have not been capable of successfully laundering the new marker.

My hon. Friend raised the question of custodial sentences. Custodial sentences for fuel laundering were handed down in 2016 following a successful HMRC investigation into a £2.6 million fuel laundering scheme. However, the scarcity of custodial sentences for what is clearly a serious crime is noticeable and disappointing. My hon. Friend was right to raise that matter today. Right hon. and hon. Members from Northern Ireland know that justice and policing are devolved matters, but I will give further consideration to this issue and I am happy to engage with them on how we might move forward. I am informed that sentences for this crime in Northern Ireland are, taken together, more lenient than those in England and Wales. We should all give that further consideration.

My hon. Friend mentioned points raised by the Road Haulage Association. I am happy to meet him to discuss these issues at a later date. We have increased our capacity in road fuel testing units, and have provided extra resource for fuel fraud investigations across the United Kingdom, particularly in Northern Ireland. I would be happy to supply further information from HMRC regarding the quantity and where the units are being deployed. I have asked HMRC officials to supply us with better data on the numbers and on the locations at which roadside testing is happening in Northern Ireland. Tests are completed throughout the supply chain. The number of tests at suppliers’ premises in Northern Ireland has increased over the course of the last two financial years.

[Ian Paisley]

I really appreciate the level of engagement that the Minister is offering—both with himself and officials. Will he arrange for the Chancellor also to be engaged in the discussions, so that we can ensure that he appreciates how seriously we want this matter to be addressed?

[Robert Jenrick]

I raised this matter with the Chancellor in advance of this debate, and he would be happy to meet my hon. Friend and his colleagues if they wish to join. I suggest that I arrange a meeting with him and others who wish to participate as soon as possible so that we can take this matter forward. In advance of that meeting I will review some of the other issues that he has raised and the points made by the Road Haulage Association so that we can have the most productive conversation possible. The Chancellor is very aware of the importance of this issue in Northern Ireland and of the assiduous way in which my hon. Friend has pursued it over many years—going back at least five years—by raising it with the Government and in Parliament, so we would be happy to take this matter forward.

I thank my hon. Friend for raising the issue. We have had a productive debate. I listened closely to the comments that he made and hope that I have been able to answer some of them. The Government are committed to tackling avoidance, evasion and fraud throughout the tax system. For all the reasons that we have heard this evening, this is an important issue that deserves our attention and deserves to be elevated in the level of importance to which HMRC and law enforcement authorities in the whole United Kingdom, but particularly in Northern Ireland, attach to it. I will do everything that I can from my position in the Treasury to ensure that that happens. I look forward to working with my hon. Friend and his colleagues to take this matter forward.

Question put and agreed to.